Medicare expands ‘step therapy’ policy — also called ‘fail first’

Paul Sisson
The San Diego Union-Tribune

Though its name sounds like a trendy workout craze, Medicare’s new “step therapy” policy has nothing to do with getting people in their 60s to move their feet.

Sometimes called “fail first,” step therapy is the term used when a health insurance company forces doctors to prescribe the cheapest medication first, providing access to more expensive alternatives only if the first option doesn’t get results.

The U.S. Centers for Medicare and Medicaid Services recently announced that privately administered Medicare Advantage plans will be allowed to create step therapy policies for drugs delivered in doctors’ offices and other outpatient settings. Such measures are already allowed in Medicare “Part D” medication plans.

Allowing step therapy for doctor-administrated drugs represents a significant change, especially since this class of medication often is used to treat serious illness such as cancer, said Juliette Cubanski, director of the Program on Medicare at the nonpartisan Kaiser Family Foundation.

“This is definitely a fundamental change in terms of giving plans more authority,” Cubanski said. “I would think that health plans would tread carefully because they don’t want to end up driving customers away.”

Drug evidence: Sarah Emond, executive vice president and chief operating officer for the Institute for Clinical and Economic Review in Boston, said it will be incumbent on health insurance companies to make sure that they’re not ignoring evidence which shows that one drug can deliver better results than another even though it costs more.

“You would definitely want something like this to be anchored in solid evidence,” Emond said.

The federal government touted the move as a positive for the millions of Medicare recipients nationwide who feel drug prices are too high, saying in a statement that the move “empowers patients with more choices” and that it shows that the Trump administration is taking “action to lower drug prices.”

But many have been quick to say the change could slow down the often-frantic process of finding the right drug among many options to treat deadly diseases. In its own statement, the American Cancer Society said allowing step therapy for Medicare Part B plans “could erect barriers to care for cancer patients” while the American College of Rheumatology called the decision “an affront to America’s sickest Medicare patients.”

Those concerns, though, rub up against public outrage over drug prices. According to Health System Tracker, a service of the nonpartisan Kaiser Family Foundation, Americans continue to pay drastically-higher prices for drugs. For example, the average 2014 price for a 28-day supply of Humira, a drug used to treat rheumatoid arthritis and other conditions, was $2,669 in the United States, a sum that is 96 percent higher than the average paid in the United Kingdom.

Private health plans: Some private health plans already employ step therapy for some drugs on their formularies. A 2011 analysis in the Journal of Managed Care and Specialty Pharmacy, which examined the evidence in 14 different step therapy studies, found that forcing patients to take the cheapest drug, with the exception of antipsychotic medications used to treat conditions such as schizophrenia or bipolar disorder, does save money.

However, many have questioned the ethics of fail-first policies.

Noting that many states have limited step therapy amid doctor and patient stories of long waits for approval after first-step drugs fail or side effects appeared, researchers argued in a 2014 paper that step therapy can pose ethical problems when forcing a patient to take a cheaper drug could cause significant harm such as when treating “cancer, mental health, or seizure conditions.”

Medicare’s step therapy rule does give doctors and patients an out, allowing them to request an exception to a fail-first requirement and get a decision within 72 hours. Denied exceptions can be appealed to Medicare.

Any Medicare Advantage plan that decides to implement a step therapy program must notify all current policy holders of the change in writing, and Medicare has extended the amount of time that it will allow beneficiaries to change plans in 2019.

The costs: But the big picture remains a significant issue. The whole point of step therapy is to reduce drug costs and, while experts agree that the approach could cut costs somewhat, none predicted price shrinkage large enough that the average Medicare beneficiary would notice a significant difference.

A much more fundamental re-think of the way Medicare pays for drugs is necessary to start driving costs down closer to what the citizens of other countries pay, said Kristof Stremikis, director of market analysis and insight at the California Health Care Foundation.

Currently, he noted, Medicare uses a drug’s average price in the wider market as a baseline for what it will pay. But the reasons why those prices are what they are are often murky. If the government truly wants to make a big dent in drug prices, unpacking those prices and demanding more transparency from drug companies will be necessary.

“The baseline we have today does not necessarily incorporate an objective assessment of a drug’s value, and until that happens, the game isn’t fundamentally changed. That’s where significant savings are hiding,” Stremikis said.

Cubanski, the Kaiser expert, agreed. She noted that the new step-therapy policy does require insurance plans to pass 50 percent of money saved by requiring the use of cheaper drugs onto patients, but, in the aggregate, she said, no one should expect a reversal of ever-increasing drug price trends.

“It’s another opportunity to try and wring some savings out of Medicare, but, just because they’re given this opportunity to use step therapy doesn’t mean drug prices are coming down,” Cubanski said.